TIDMVRX
RNS Number : 1072M
Vectrix Corporation
22 January 2009
22 January 2009
VECTRIX Corporation
("Vectrix" or "the Company")
Unaudited Preliminary Results for the fiscal year ended 30 September 2008
Vectrix Corporation {AIM: VRX}, the high performance zero emission scooter
company today announces its Preliminary Results for the year ended 30 September
2008. Vectrix is the first company to design, develop and mass produce a high
performance, zero emission powered two wheel vehicle. The Vectrix VX1 Scooter,
the Company's first vehicle to be commercially marketed, has a top speed of
62mph, a range up to 60 miles and acceleration of 0-50 mph in 6.8 seconds.
Principal Events
* Sold 1,167 bikes to dealers ("Sell In") and sold 715 bikes to end customers
("Sell Out").
* Recognized approximately US $6.35 million in revenue from sales of bikes to end
customers with approximately $5.52 million in deferred revenue from sales of
bikes to dealers, to be recognized upon final sale to end customers.
* Expanded our dealer organization to 160 points of sale from 38 at the end of
fiscal 2007.
* During the second half we reorganized our management team within the CEO,
finance, sales and marketing functions in order to refocus our strategy away
from the original Italian centric plan which proved to be a significant false
start for the company. This refocused strategy emphasizes dealer development in
both the US and European markets and has proven to be more successful as
demonstrated by our Sell In results during the second half of FY2008.
* Streamlined our European operations under a single management umbrella which
will be tasked with supporting the existing dealer base in all of Europe as well
as expanding distribution through aggressive dealer development programs.
* Throughout the second half the Company reduced operating expenses and monetized
aspects of the balance sheet through reductions in accounts receivable,
inventory and VAT.
* Transitioned the Company from an R&D development stage company to full
commercialization of the Vectrix products and organization.
* Developed for introduction in fiscal 2009 an expanded product family including
the refreshed version of the Vx1, the new Vx1e which is a lower priced model
which will appeal to a more urban commuter and the new Vx2 which is an all new
platform designed from the bottom up as the high end smaller and more compact
two wheel electric vehicle.
* Entered into an agreement with GE Financial Services for GE to provide inventory
financing for our US dealers.
* In the first quarter of fiscal 2009 we began equity fund raising events to
address liquidity concerns brought on by the recent worldwide economic crisis.
Enquiries:
+--------------------------------------+--------------------------------------+
| VECTRIX Corporation | www.vectrix.com |
+--------------------------------------+--------------------------------------+
| Michael Boyle, Chief Executive | 401-848-9993 |
| Officer | |
+--------------------------------------+--------------------------------------+
| John D. McGuinness, Chief Accounting | |
| Officer | |
| | |
+--------------------------------------+--------------------------------------+
| | |
+--------------------------------------+--------------------------------------+
| HSBC | 020 7991 8888 |
+--------------------------------------+--------------------------------------+
| Nic Hellyer / Nick Donald | |
| | |
+--------------------------------------+--------------------------------------+
This document contains forward looking statements, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and similar expressions. Such forward looking statements involve unknown risks,
uncertainties and other factors which may cause the actual results, financial
condition, performance or achievements of the Company, or industry results, to
be materially different from any future results, performance or achievements
expressed or implied by such forward looking statements. New factors may emerge
from time to time that could cause the Company's business not to develop as it
expects, and it is not possible for the Company to predict all such factors.
Given these uncertainties, investors and prospective investors are cautioned not
to place any undue reliance on such forward looking statements. Except as
required by law or AIM rules, the Company disclaims any obligation to update any
such forward looking statements in this report to reflect future events or
developments.
These materials do not constitute an offer to purchase or subscribe for the
Company's securities. The Company's common stock has not been and will not be
registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered, sold, pledged or otherwise
transferred except if such transfer is effected (1) in a transaction meeting the
requirements of Regulation S under the Securities Act, (2) pursuant to an
effective registration statement under the Securities Act, or (3) pursuant to an
available exemption from the registration requirements of the Securities Act, in
each case in accordance with all applicable securities laws, including
applicable state securities laws of the United States.
CHIEF EXECUTIVE'S STATEMENT
During FY 2008 we sold (Sell-In) to dealers 1,167 bikes as compared to 468 bikes
in FY 2007 for a year over year growth of 149%. This broke down to 204 bikes in
the first half of FY2008 and 963 bikes in the second half of FY2008 for a half
over half growth rate of 372%.This growth in second half units Sell-In marked
the conversion of Vectrix from an R&D development stage company to full
commercialization of the Vectrix products and organization. By market, North
American Sell-In was 453 bikes for FY2008 of which 435 were in the second half
of FY2008 up from 18 in the first half. This growth is attributed to our
strategy to focus on North American dealer development which included our
successful negotiation with GE to provide inventory financing to our dealers. In
Europe Sell-In was 714 bikes for FY2008 of which 528 were in the second half of
FY2008 up from 186 in the first half.
Revenue is presented as a calculation of units sold (Sold-Out) to end customers.
For FY2008 a total of 715 bikes were Sold-Out generating revenue of
approximately $6.4 million as compared to FY2007 revenue of approximately $0.8
million, an increase of 675%. The FY 2008 Sell-Out revenue broke down to $1.9
million in the first half and approximately $4.5 million in the second half for
a half over half growth rate of approximately 137%.
Also during FY2008 we saw significant growth in our distribution business
defined as dealer points of sale. In FY2008 we expanded our dealer organization
to 160 from 38 at the close of FY2007 an increase of 122 or 321% growth. This
growth occurred in both North America and Europe with virtually all the growth
occurring in the second half of FY2008. We believe our continued focus and
success in building this distribution network is critical to supporting the long
term success of the company. For the first time in the company's history we
entered FY2009 with a backlog of orders for product. We continued production on
the 2008 model until mid November at which time we began production of the 2009
model year.
For FY2009 we are introducing our expanded Product Family. Our flagship product
will be identified as the Vx1 which is a refreshed version of the current
Vectrix bike with new paint colours and an exciting new look. A new product and
model identified as the Vx1e will be introduced in Q2-FY2009. This model uses
the same platform and drive train as the Vx1 with more of an urban commuter
driver profile and with slightly less acceleration and top speed. Using SLA
(sealed lead acid) battery technology the Vx1e creates an exciting new price
point for the urban commuter. We are also introducing an entry level model,
identified as the Vx2, which is an all new platform designed from the bottom up
as the high end smaller and more compact two wheel electric vehicle. We expect
this to be available in Q3-FY2009. The Vx2 is sized as the electric equivalent
to a 50cc gas bike and uses both US and European designs. It is our expectation
to add additional power profiles to this product reaching the electric
equivalent of a gas 150cc bike. Like the Vx1 and Vx1e, the Vx2 has the
distinctive Vectrix style and quality consumers have come to associate with our
products. This expanded product line creates a "Product Family Strategy"
providing the consumer a Vectrix product equivalent to gas from 50cc to 350cc,
the largest all electric two wheel line up in the world. Additionally, we are
introducing a line of new accessories from seats and windshields to rear view
mirrors. All of these new products and accessories will contribute and support
our growth in FY2009. Vectrix is positioned in the market as a high end product
offering with exceptional technology, engineering, performance and quality. Our
strategy of a "family of products" will build on the current Vectrix brand
image, positioning our products in a similar way as automotive companies have,
such as BMW and Daimler, with their family of vehicles.
As part of our strategy to streamline Vectrix operations we have consolidated
our operations in Europe under a single management umbrella known as Vectrix
Europe which is headquartered in the UK. This organization is tasked with
supporting the existing dealer base in all of Europe as well as expanding
distribution through aggressive dealer development programs. In addition, we
also made changes within our worldwide finance and domestic sales and marketing
functions. These changes along with the streamlining of our European operations
will allow the company to be more efficient and less expensive to operate.
We will continue to build the Vx1 and Vx1e at our plant in Poland although
current production levels continue to result in a lower absorption of fixed
overheads than desired and we are looking at alternatives to optimize the
facility. We have also entered into a supplier agreement for the Vx2 product
where final assembly will be completed under our supervision in the
Peoples Republic of China. During the second half the Company made a $494
thousand milestone prepayment to this supplier. The agreement includes milestone
payments that will total approximately $2.0 million.
Much of the acceleration in sales is a result of the previously announced
pricing strategy and has also resulted in significant inventory reductions from
accelerated sales rates amounting to approximately $8.9 million, while also
conditioning the consumer expectation for model price increases for 2008 and the
new 2009 model year offerings.
Mike Boyle CEO of Vectrix commented on company performance: "The Vectrix
turnaround which began in the second half is progressing and our performance in
all areas is improving. We believe the overall market interest in the company
and our maxi scooter remains high. FY2008 sales increased, distribution is
growing and spending decreased during the second half. Our FY2009 plan will set
another milestone in validating the viability of our business. We are
implementing a product strategy to expand addressable markets by offering a
"Family of Products" thereby increasing the size of our target opportunity by
400%. Quality and style are two critical attributes of the Vectrix brand and
embedding these attributes in our new product family was critical to insure our
success for many years to come."
Current Trading Conditions and Financing
The Company's net cash position at the year end (excluding restricted cash) was
approximately $11,600,000, and at 31 December 2008 it was approximately
$3,300,000 on the same basis. As the Company is still cash flow negative,
securing additional financing is critical in the short-term if the Company is to
be able to fund its future obligations. As we have explored funding alternatives
we have found banks reluctant to offer any form of trade financing or finance
alternatives to emerging companies like Vectrix; accordingly, additional equity
capital is critical to our refinancing plans. In December we announced that we
were evaluating options for an equity fund raising. Discussions are continuing
with potential investors and we anticipate a further update before the end of
March 2009. If we are unable to complete a fund raising by the end of March it
is likely that the Directors would need to seek other financial or strategic
alternatives. However, even if financing sufficient to ensure short-term
liquidity is secured by that date, it remains possible that our auditors may
issue a report indicating there is substantial doubt about our ability to
continue as a going concern in connection with the issuance of our financial
statements.
Although trading has been affected by the recent volatility in world financial
markets, with additional equity financing Vectrix expects to hold its ground in
the current market down turn and expects to see strong growth year over year in
the first half of fiscal 2009. Our dealers in the US had expressed concern over
the contraction of trade financing facilities but now indicate that the concern
is easing and levels of optimism are building as we enter into the second
quarter. In Europe the markets for our products have been more stable and our
dealers have experienced strong year on year growth in FY2008. With continued
improvement in the US market and sustained growth in European markets we expect
Vectrix worldwide to grow at a significant rate year over year in our first half
of fiscal year 2009. Currently we are projecting unit Sales growth ("Sell In")
in the first half of more than double the same period last year, although as
announced in December this is lower than we had previously expected. This year
over year growth is expected without considering the impact of our new products
which will not have sales until the second half of fiscal year 2009.
Although we are improving and growing we have not yet achieved the critical mass
that supports profitability. Vectrix's directors and management are committed to
achieving the bottom line measurement of a profitable company and we are
confident the actions we have taken to date will support achieving that
endeavour.
While the impact of the worldwide credit crisis has required us to raise
additional funding in the short term, FY2008 was a turning point for Vectrix
operations. We have established significant world wide distribution, implemented
restructuring programs to reduce expenses, increased sales and validated the
Vectrix brand and our maxi scooter product as the premiere two wheel electric
vehicle in the world. We would like to thank our shareholders, vendors and
employees for their faith, confidence and hard work in achieving this early
position for all Vectrix electric technologies.
BUSINESS REVIEW
Nature of the Business and Organization
Vectrix Corporation ("the Company") was incorporated in Delaware on 6 March 1996
as Breeze Acquisition Corporation to develop, manufacture and distribute
advanced, commercially viable electric vehicle technology. In FY2008 the
Company had wholly-owned subsidiaries in Italy, Ireland, the United Kingdom and
Poland.
From inception, the Company has devoted its efforts primarily to research and
technology development, securing financing and business planning. The Company
now feels principal operations have begun and accordingly no longer
considers itself a development stage company. The Company is subject to a number
of risks and uncertainties associated with emerging technologies. Principal
among these are risks associated with the ability to obtain additional
financing, continued commercial acceptance of the Company's products, the
build-out of effective distribution channels, the dependence upon key
individuals and the achievement of profitability.
On 24 May 2007, the Company's common stock was admitted to the AIM Market of the
London Stock Exchange ("the AIM Listing") and the Company raised approximately
$66.8 million, net of offering costs.
Revenue
Revenues consist of sales of scooters to end customers. For fiscal 2008 the
Company recognized revenue of approximately $6,354,000. This amount was
comprised of sales to end customers in North America (24%) and Europe (76%). In
fiscal 2007 the Company recognized revenue of $819,000. This amount was
comprised of sales to end customers in North America (34%) and Europe (66%).
The Company currently recognizes revenue only on sales of scooters to end
customers until such time as the rate of scooter returns from dealers can be
reasonably estimated, amongst other criteria. For scooter sales to dealers, the
Company records deferred revenue at gross invoice sales price less estimated
cash discounts. As of 30 September 2008, the Company recorded deferred revenues
of $5,522,000 related to sales of scooters to dealers which have not yet sold
out to end customers.
Cost of Goods Sold
Inventory Revaluation
The Company performed a detailed assessment of inventory which included a review
of among other factors, demand requirements and market conditions. As a result
of this assessment, the Company recorded a $978,000 inventory revaluation charge
related to finish goods.
Adverse Purchase Commitment
During fiscal 2008 the Company entered into an agreement to settle outstanding
purchase commitments and a strategic agreement to develop lithium battery
technology and production capability (the "Lithium Agreement") with a battery
manufacturer. Under the agreement, the Company agreed to pay consideration of
$4,208,500 to settle its adverse purchase commitment. Of this amount, $3,979,500
was recorded as an adverse purchase commitment in fiscal 2007 and the remaining
$229,000 was recorded as an adverse purchase commitment in fiscal 2008. This
amount was settled through the payment of $3,090,000 for NiMH batteries and a
commitment to deliver Vectrix scooters valued at $1,118,500. At 30 September
2008, the Company had a balance of $791,000 in accrued liabilities representing
the amount of scooters not yet delivered to the battery manufacturer.
Other Cost of Goods Sold
Other cost of goods sold includes costs related to sales of scooters to end
customers, unabsorbed manufacturing costs, warranty costs, freight and other
various production costs.
Operating Expenses
Research & Development
Research & Development consists of wages and benefits, occupancy costs for the
R&D facility, technology development expenses and other various expenses. The
$2,412,000 (23.7%) decrease from the prior year was primarily the result of a
reduction in technology development expenses as the Company moved towards full
commercialization. This reduction was offset by a $503,000 increase in stock
based compensation expense as presented in Note-8.
Selling & Marketing
Selling & Marketing consists of wages and benefits, commission expense, travel,
marketing and trade shows and other various expenses. The $3,336,000 (29.7%)
increase from the prior year was primarily driven by increases in wages, stock
based compensation expense and commissions as we build out the sales team.
These increases were partially offset by a reduction in marketing and trade show
expenses as the Company restructured and right sized its marketing programs. As
presented in Note-8, stock based compensation expense increased approximately
$1,868,000 from the prior year as a result of the departure of the former COO at
which time his stock based compensation became fully vested and an expense of
the Company.
General & Administrative
General & Administrative consists of wages and benefits, travel, professional
fees, occupancy costs, insurance and other various expenses. The $9,949,000
(106.0%) increase from the prior year was driven primarily by stock based
compensation expense, wages, professional fees and occupancy costs. As
presented in Note-8, stock based compensation expense increased approximately
$5,526,000 from the prior year as a result of the departure of the former CEO
and CFO at which time their stock based compensation became fully vested and an
expense of the Company. The remaining increase in G&A expense was split between
wages, professional fees, occupancy costs and other miscellaneous expenses.
Restructuring Charge
During fiscal 2008 the Company restructured its Sales & Marketing function by
closing the Company's Italian operations and eliminating redundant positions. As
a result of these changes the Company provided $1,561,000 for restructuring
expenses such as severance, professional fees and the write down of assets.
Impairment Charge
At the end of the year the Company reviewed its long lived assets and made the
determination that certain fixed assets and deposits were impaired and not
expected to generate any future economic benefit. Accordingly, the Company
recorded $2,457,000 for impairment charges.
Disposal of Assets
During fiscal 2008 the Company performed an extensive review of fixed assets at
each of its location. As a result of this review the Company disposed of certain
assets which were no longer being used in current operations. Accordingly, the
Company recorded a $1,741,000 charge for the disposal of assets.
Acquired Technology
The Company also executed a strategic agreement to develop lithium battery
technology and production capabilities with Gold Peak Batteries. As a result of
this agreement the Company recorded $3,584,549 as acquired technology expense
during fiscal 2008.
Liquidity and Capital Resources
As of 30 September 2008, the Company had $11,596,000 of operating cash and
$5,753,000 of other working capital. Cash and short term investments decreased
$38,802,000 from the prior year primarily as a result of the cash used in
operations resulting from the Company's net loss.
Cash Used in Operations
Net cash used in operations was $33,604,000 for the twelve months ended 30
September 2008. The primary use of cash was the $61,479,000 net loss experienced
during the year. Adjusted for non-cash charges the net loss was $48,214,000.
This adjusted loss along with the Company's successful efforts to monetize
certain aspects of the balance sheet such as accounts receivable, inventory and
VAT resulted in $33,604,000 cash used in operations.
Cash Provided by Investing Activities
Net cash provided by investing activities was $352,000 for the twelve months
ended 30 September 2008. During fiscal 2008 the Company sold $6,066,000 of short
term investments, used $2,588,000 for the purchase of furniture and fixtures,
automobiles, machinery and equipment and software and used $3,125,000 as
restricted cash primarily as security for the new GE dealer inventory financing
program.
Cash Used in Financing Activities
Cash used in financing activities was $905,000 for the twelve months ended 30
September 2008. The primary use of cash was the repayment of a bank overdraft
and the payment of capital lease obligations during the year.
Summary
As of 30 September 2008 the Company had $11,596,000 of cash available for
operations. Given the expected increase in sales during fiscal 2009 and the
level of working capital which will be required to deliver against those
expectations we believe it will be necessary to accelerate our need for fund
raising during the first half of fiscal 2009.As discussed above, if we are
unable to complete the fund raising by the end of March our auditors may issue a
report indicating there is substantial doubt about our ability to continue as a
going concern in connection with the issuance of our financial statements.
John D. McGuinness
Chief Accounting Officer
Vectrix Corporation
Consolidated Statement of Operations
(Unaudited)
+----------------------------------------------------+--+--+-------------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
| | | | | | | | | |
+-------------------------------------------------------------------------------------+-------------+-+------+----------+----------------+-+----------+----------+
| | | Twelve Months Ended | |
| | | | |
+----------------------------------------------------+--+----------------------------------------------------------------------+--+
| | | 30 September | |
| | | | |
+----------------------------------------------------+--+----------------------------------------------------------------------+--+
| | | 2008 | | | 2007 | |
+----------------------------------------------------+--+----------------+--+--+-----------------------------------------------+--+
| Net Revenues | | $| 6,354,747 | | | $ | 818,818 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Cost of Goods Sold | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Inventory revaluation | | | 977,987 | | | | 3,173,517 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Battery excess charge | | | - | | | | 1,949,500 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Adverse purchase commitment | | | 229,000 | | | | 3,979,500 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Other cost of goods sold | | | 24,072,432 | | | | 4,553,274 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Total cost of goods sold | | | 25,279,419 | | | | 13,655,791 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Gross Loss | | | (18,924,672 | )| | | (12,836,973 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Operating Expenses | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Research and development | | | 7,738,020 | | | | 10,150,343 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | |
+----------------------------------------------------+----------------------+-----------------------------------------------------+
| Selling and marketing | | | 14,539,515 | | | | 11,203,818 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| General and administrative | | | 19,333,579 | | | | 9,384,967 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Start-up cost | | | - | | | | 730,923 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Restructuring Charge | | | 1,561,039 | | | | - | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Impairment charge | | | 2,457,101 | | | | 3,690,000 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Disposal of assets | | | 1,741,137 | | | | - | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Acquired technology | | | 3,584,549 | | | | - | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | |
+----------------------------------------------------+----------------------+-----------------------------------------------------+
| Total operating expenses | | | 50,954,940 | | | | 35,160,051 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Loss from operations | | | (69,879,612 | )| | | (47,997,024 | )|
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Interest expense | | | - | | | | (10,957,856 | )|
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Interest income | | | 975,919 | | | | 881,922 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | |
+----------------------------------------------------+----------------------+-----------------------------------------------------+
| Other (expense) income, net | | | (1,009 | )| | | 21,804 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Foreign exchange gain | | | 7,331,562 | | | | 4,089,162 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Loss before income taxes | | | (61,573,140 | )| | | (53,961,992 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Benefit (provision) for income taxes | | | 94,391 | | | | (191,007 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Net Loss | | $| (61,478,749 | )| | $ | (54,152,999 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Weighted average shares outstanding: | | | 260,123,044 | | | | 151,269,287 | |
| Basic and diluted | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Basic and diluted net loss per share | | $| (0.24 | )| | $ | (0.36 | )|
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
Vectrix Corporation
Consolidated Balance Sheet
(Unaudited)
+------------------------+-----+-----+-----+--+-+-------+-+-----+-----+-----+-----+-----+-----+--+--+-----+-----+--+
| | | | | | | | | |
+------------------------------+--------------+-+-------+-+-----------+-----------+--------------+--+
| | | 30 September, 2008 | | | 30 September | |
| | | | | | 2007 | |
+------------------------------+-----------+--------------------------+-----------+-----------+-----------------+--+
| | | | | | | |
+------------------------------+-----------+--------------------------+-----------+-----------+-----------------+--+
| ASSETS | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| CURRENT | | | | | | | | |
| ASSETS | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Cash | | $| 11,596,053 | | | $| 44,332,096 | |
| and | | | | | | | | |
| cash | | | | | | | | |
| equivalents | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Short | | | - | | | | 6,066,000 | |
| term | | | | | | | | |
| investments | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Restricted | | | 865,859 | | | | 235,112 | |
| cash | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Accounts | | | 1,997,313 | | | | 4,457,416 | |
| receivable, | | | | | | | | |
| net | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Inventories | | | 10,363,101 | | | | 19,288,739 | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Inventory | | | 5,522,198 | | | | 3,892,388 | |
| in | | | | | | | | |
| custody | | | | | | | | |
| of | | | | | | | | |
| dealers | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| VAT | | | 2,750,167 | | | | 5,932,677 | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Prepaid | | | 1,327,001 | | | | 776,969 | |
| expenses | | | | | | | | |
| and | | | | | | | | |
| other | | | | | | | | |
| current | | | | | | | | |
| assets | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Total | | | 34,421,692 | | | | 84,981,397 | |
| Current | | | | | | | | |
| Assets | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | |
+------------------------------+--------------------------------------------------+--------------------------------+
| Property | | | 6,120,413 | | | | 10,248,136 | |
| and | | | | | | | | |
| equipment, | | | | | | | | |
| net | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Restricted | | | 2,500,000 | | | | - | |
| cash | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Other | | | 597,949 | | | | 307,507 | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Total | | $| 43,640,054 | | | $| 95,537,040 | |
| Assets | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| LIABILITIES | | | | | | | | |
| AND | | | | | | | | |
| SHAREHOLDERS' | | | | | | | | |
| EQUITY | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| CURRENT | | | | | | | | |
| LIABILITIES | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Accounts | | $| 4,665,648 | | | $| 7,195,458 | |
| payable | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Accrued | | | 1,875,952 | | | | 1,250,973 | |
| liabilities | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Accrued | | | 1,593,878 | | | | 756,077 | |
| compensation | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Bank | | | - | | | | 784,219 | |
| overdraft | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Current | | | 54,770 | | | | 44,000 | |
| portion | | | | | | | | |
| of | | | | | | | | |
| capital | | | | | | | | |
| lease | | | | | | | | |
| obligation | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Short-term | | | - | | | | 52,195 | |
| notes | | | | | | | | |
| payable | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Adverse | | | - | | | | 3,979,500 | |
| purchase | | | | | | | | |
| commitment | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Deferred | | | 5,522,198 | | | | 4,074,223 | |
| revenue | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Other | | | 3,360,391 | | | | 450,694 | |
| current | | | | | | | | |
| liabilities | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Total | | | 17,072,837 | | | | 18,587,339 | |
| Current | | | | | | | | |
| Liabilities | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | |
+------------------------------+--------------------------------------------------+--------------------------------+
| Capital | | | 173,848 | | | | 153,388 | |
| lease | | | | | | | | |
| obligation, | | | | | | | | |
| less | | | | | | | | |
| current | | | | | | | | |
| portion | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Other | | | 120,915 | | | | 74,362 | |
| long | | | | | | | | |
| term | | | | | | | | |
| liabilities | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Total | | | 17,367,600 | | | | 18,815,089 | |
| Liabilities | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | |
+------------------------------+--------------------------------------------------+--------------------------------+
| SHAREHOLDERS' | | | | | | | | |
| EQUITY | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Common | | | 28,313,633 | | | | 25,945,521 | |
| Stock, | | | | | | | | |
| $.10 | | | | | | | | |
| Par | | | | | | | | |
| Value, | | | | | | | | |
| Authorized | | | | | | | | |
| 435,000,000 | | | | | | | | |
| Shares, | | | | | | | | |
| Issued | | | | | | | | |
| 283,136,331 | | | | | | | | |
| and | | | | | | | | |
| 259,455,215_Shares, | | | | | | | | |
| respectively | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Additional | | | 179,452,424 | | | | 169,455,857 | |
| paid-in | | | | | | | | |
| capital | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Accumulated | | | (179,741,635 | ) | | | (118,262,885 | )|
| deficit | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Accumulated | | | (1,751,968 | ) | | | (416,542 | )|
| other | | | | | | | | |
| comprehensive | | | | | | | | |
| loss | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Total | | | 26,272,454 | | | | 76,721,951 | |
| Shareholders' | | | | | | | | |
| Equity | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| Total | | $| 43,640,054 | | | $| 95,537,040 | |
| Liabilities | | | | | | | | |
| and | | | | | | | | |
| Stockholders' | | | | | | | | |
| Equity | | | | | | | | |
+------------------------------+-----------+--+-----------------------+-----------+-----------+--+--------------+--+
| | | | | | | | | |
+------------------------+-----+-----+-----+--+-+-------+-+-----+-----+-----+-----+-----+-----+--+--+-----+-----+--+
Vectrix Corporation
Consolidated Statement of Cash Flows
(Unaudited)
+----------------------------------------------------+--+--+-------------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
| | | | | | | | | |
+-------------------------------------------------------------------------------------+-------------+-+------+----------+----------------+-+----------+----------+
| | | Twelve Months Ended | |
+----------------------------------------------------+--+----------------------------------------------------------------------+--+
| | | 30 | | | 30 September 2007 | |
| | | September | | | | |
| | | 2008 | | | | |
+----------------------------------------------------+--+----------------+--+--+-----------------------------------------------+--+
| Cash Flows from Operating Activities: | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Net Loss | | $| (61,478,749 | ) | | $ | (54,152,999 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Adjustments to reconcile net loss to cash | | | | | | | | |
| used in operating activities: | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Depreciation and amortization | | | 2,667,619 | | | | 1,379,047 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Noncash interest on notes | | | - | | | | 4,924,677 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Gain on foreign exchange translation | | | (6,193,622 | )| | | - | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Acquired technology in strategic | | | 2,249,049 | | | | - | |
| agreement | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Noncash charges related to issuance of | | | - | | | | 6,033,179 | |
| warrants | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Stock-based compensation and expenses | | | 10,343,831 | | | | 2,307,685 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Loss on disposal of fixed assets | | | 1,741,137 | | | | - | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Impairment charges | | | 2,457,101 | | | | 3,690,000 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Changes in assets and liabilities | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Accounts receivable | | | 2,616,777 | | | | (4,247,987 | )|
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Prepaid expenses and | | | (1,270,347 | )| | | (278,095 | )|
| other current assets | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Inventory | | | 9,142,420 | | | | (16,514,723 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Inventory in custody | | | (1,356,526 | )| | | (3,636,409 | ) |
| of dealers | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| VAT | | | 3,969,458 | | | | (5,471,767 | )|
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Accounts payable | | | (3,070,418 | )| | | 2,733,718 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Accrued expenses and | | | 3,387,633 | | | | (2,613,364 | )|
| other liabilities | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Adverse purchase | | | - | | | | 3,979,500 | |
| commitment | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Deferred revenue | | | 1,190,142 | | | | 3,849,366 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Net Cash Used by Operating Activities | | | (33,604,495 | )| | | (58,018,172 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | |
+----------------------------------------------------+----------------------+-----------------------------------------------------+
| Cash Flows from Investing Activities: | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Restricted cash | | | (3,125,230 | )| | | (218,943 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Sale (purchase) of short term investments | | | 6,066,000 | | | | (6,016,000 | )|
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Purchase of property and equipment | | | (2,588,288 | )| | | (8,990,886 | )|
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Investment in joint venture | | | - | | | | (3,690,000 | )|
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Net Cash Provided (Used) by Investing | | | 352,482 | | | | (18,915,829 | )|
| Activities | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | |
+----------------------------------------------------+----------------------+-----------------------------------------------------+
| Cash Flows from Financing Activities: | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Proceeds from issuance of common stock, | | | 800 | | | | 66,812,485 | |
| net of issuance costs | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Proceeds from private issuance of common | | | - | | | | 25,336,112 | |
| stock, net of issuance costs | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Proceeds from issuance of notes payable | | | - | | | | 25,050,000 | |
| and warrants to stockholders, net of | | | | | | | | |
| issuance costs | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Proceeds from exercise of warrants | | | - | | | | 1,365,498 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Bank overdraft | | | (784,219 | )| | | 784,219 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Repayment of capital lease obligation | | | (121,623 | )| | | (84,795 | )|
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Net Cash (Used) Provided by Financing | | | (905,042 | )| | | 119,263,519 | |
| Activities | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | |
+----------------------------------------------------+----------------------+-----------------------------------------------------+
| Effect of exchange rate changes | | | 1,421,012 | | | | (130,067 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Net (Decrease) increase in Cash and Cash | | | (32,736,043 | )| | | 42,199,451 | |
| Equivalents | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Cash and Cash Equivalents, Beginning of | | | 44,332,096 | | | | 2,132,645 | |
| Period | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Cash and Cash Equivalents, End of Period | | $| 11,596,053 | | | $ | 44,332,096 | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Supplemental cash flow disclosure | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Transfer of marketing bikes (from) to | | | (926,194 | )| | | 1,363,634 | |
| fixed assets to (from) inventory | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Settlement of the "Lithium Agreement" | | | 2,020,049 | | | | - | |
| with the issuance of common stock | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
Notes to Financial Statements
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation: The Consolidated financial information is presented in
accordance with accounting principles generally accepted in the United States
(US GAAP).
Consolidation: The unaudited consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Vectrix Europe
S.r.l., Vectrix Europe Limited, Vectrix (UK) Limited and Vectrix sp. Z.o.o. All
inter-company transactions and balances have been eliminated.
Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that effect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Reclassifications: Certain prior year balances have been reclassified to
conform to the current year's presentation. In fiscal 2007 approximately
$3,600,000 for the Company's Poland operations were classified as research and
development and general and administrative expenses. These expenses have been
reclassified to cost of goods sold in the current year's presentation. In
addition, in fiscal 2007 all of the Company's $2,307,685 of stock based
compensation expense was recorded to selling and marketing expenses. These
expenses have also been reclassified to either cost of goods sold, research and
development and general and administrative expenses.
Revenue Recognition: The Company recognizes revenue when it is realized or
realizable in accordance with the SFAS No. 48 - "Revenue Recognition When Right
of Return Exists". Revenue is realized or realizable and earned when all of the
following criteria are met: (1) persuasive evidence of an arrangement exists;
(2) delivery has occurred or services have been rendered; (3) the seller's price
to the buyer is fixed or determinable; and (4) collectability is reasonably
assured. SFAS No. 48 states that revenue from sales transactions where the buyer
has the right to return the product shall be recognized at the time of sale only
if (1) the seller's price to the buyer is substantially fixed or determinable at
the date of sale; (2) the buyer has paid the seller, or the buyer is obligated
to pay the seller and the obligation is not contingent on resale of the product:
(3) the buyer's obligation to the seller would not be changed in the event of
theft or physical destruction or damage of the product; (4) the buyer acquiring
the product for resale has economic substance apart from that provided by the
seller; (5) the seller does not have significant obligations for future
performance to directly bring about resale of the product by the buyer; and (6)
the amount of future returns can be reasonably estimated.
Note 2 - Restricted Cash
The Company has total restricted cash of $3,366,000 of which $2,500,000 is with
GE Financial Services to support the new dealer inventory financing program
which was introduced in fiscal 2008. Additionally, the Company also has other
restricted cash with freight vendors and the Company's credit card vendor. As
of 30 September 2008, GE was owed approximately $1,709,000 from dealers for
inventory not sold out. The GE restricted cash is securing these receivables.
Note 3 - Accounts Receivable
The accounts receivable balance of $1,997,000 represents amounts owed to the
Company by dealers in countries where bikes are sold. The amounts related to
sales in North America total $646,000 and Europe total $1,351,000. The primary
drivers causing the reduction in accounts receivable compared to the prior year
with increasing unit sales are the reduction in wholesale prices during fiscal
2008 and the GE inventory financing program in North America. These sales are
usually paid by GE within twenty one days of the sale.
Note 4 - Inventory
Inventory is stated at the lower of cost or market and includes materials,
direct labor and manufacturing overhead. The Company performs a detailed
assessment of excess and obsolete inventory, as well as purchase commitments, at
each balance sheet date. This assessment includes a review of, among other
factors, demand requirements and market conditions. The decrease from the prior
year is the result of the Company's successful efforts to monetize the inventory
balance during the year and also the result of write downs during fiscal 2008.
Note 5 - Inventory in Custody of Dealers
The Inventory in Custody of Dealers balance of $5,522,000 is related to bikes
sold to dealers which have not been sold to end customers. Although legal title
to these bikes has transferred, the associated revenue and cost of goods sold
has been deferred until the bikes are sold to the end customer at which time the
Company recognizes revenue and the associated cost of goods sold. This
accounting treatment is consistent with the "Sell Out" method of accounting. At
the end of fiscal 2008 the Company wrote off approximately $87,000 of Inventory
in Custody of dealers in order to eliminate the embedded deferred loss on
deferred revenue to be recognized in future periods.
Note 6 - VAT
The VAT balance of $2,750,000 represents amounts owed to the Company from VAT
offices in countries outside of the United States. All amounts are expected to
be collected from the VAT offices or offset against future taxes and VAT
payables by the end of fiscal 2009. In addition to the $2,750,000 VAT receivable
recorded within current assets, the Company also has a $340,000 VAT receivable
recorded within other long term assets related to a VAT receivable in Italy
which is not expected to be collected during fiscal 2009.
Note 7 - Deferred Revenue
The deferred revenue balance of $5,522,000 is related to bikes sold to dealers
which have not been sold out to end customers. Although legal title to these
bikes has transferred, the associated revenue and cost of goods sold has been
deferred until the bikes are sold to the end customer at which time the Company
recognizes revenue and the associated cost of goods sold. This accounting
treatment is consistent with the "Sell Out" method of accounting.
Note 8 - Stock based compensation
Under the provisions of SFAS No. 123(R) "Share Based Payments", the Company
recognized $10,343,831 of stock based compensation expense in fiscal 2008. The
following table presents share-based compensation expense included in the
Company's consolidated statement of operations:
+----------------------------------------------------+--+--+------------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
| | | | | | | | | |
+------------------------------------------------------------------------------------+-------------+-+------+----------+----------------+-+----------+----------+
| | | 30 September | |
| | | | |
+----------------------------------------------------+--+---------------------------------------------------------------------+--+
| | | 2008 | | | 2007 | |
+----------------------------------------------------+--+---------------+--+--+-----------------------------------------------+--+
| Cost of goods sold | | $ | 246,359 | | | $ | 107,484 | |
+----------------------------------------------------+--+--+------------+--+--+-------------+---------------------------------+--+
| Research and development | | | 989,960 | | | | 486,966 | |
+----------------------------------------------------+--+--+------------+--+--+-------------+---------------------------------+--+
| Selling and marketing | | | 2,306,533 | | | | 438,284 | |
+----------------------------------------------------+--+--+------------+--+--+-------------+---------------------------------+--+
| General and administrative | | | 6,800,979 | | | | 1,274,951 | |
+----------------------------------------------------+--+--+------------+--+--+-------------+---------------------------------+--+
| Total | | $| 10,343,831 | | | $ | 2,307,685 | |
+----------------------------------------------------+--+--+------------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
Note 9 - Net Loss Per Common Share
Basic and diluted net loss per share is presented in conformity with SFAS No.
128 "Earnings Per Share" for all periods presented. In accordance with SFAS 128,
the basic and diluted net loss per share is computed by dividing the weighted
average number of shares of common stock outstanding during the period into the
net loss attributable to common stockholders.
+----------------------------------------------------+--+--+-------------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
| | | | | | | | | |
+-------------------------------------------------------------------------------------+-------------+-+------+----------+----------------+-+----------+----------+
| | | 30 September | |
| | | | |
+----------------------------------------------------+--+----------------------------------------------------------------------+--+
| | | 2008 | | | 2007 | |
+----------------------------------------------------+--+----------------+--+--+-----------------------------------------------+--+
| Net Loss | | | (61,478,749 | )| | | (54,152,999 | ) |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Weighted average common shares | | | 260,123,044 | | | | 151,269,287 | |
| outstanding | | | | | | | | |
+----------------------------------------------------+--+--+-------------+--+--+-------------+---------------------------------+--+
| Basic and diluted net loss per share | | $| (0.24 | )| | $ | (0.36 | ) |
+----------------------------------------------------+--+--+-------------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
Note 10 - Segments
The Company manages the business as one segment and conducts operations in the
United States, Italy, United Kingdom and Poland.
The following table summarizes the location of the Company's long-lived assets
by country:
+----------------------------------------------------+--+--+-----------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
| | | | | | | | | |
+-----------------------------------------------------------------------------------+-------------+-+------+----------+----------------+-+----------+----------+
| | | 30 September | |
| | | | |
+----------------------------------------------------+--+--------------------------------------------------------------------+--+
| | | 2008 | | | 2007 | |
+----------------------------------------------------+--+--------------+--+--+-----------------------------------------------+--+
| United States | | $| 2,482,246 | | | $ | 2,971,161 | |
+----------------------------------------------------+--+--+-----------+--+--+-------------+---------------------------------+--+
| Italy | | | 531,143 | | | | 2,507,974 | |
+----------------------------------------------------+--+--+-----------+--+--+-------------+---------------------------------+--+
| Poland | | | 3,616,199 | | | | 4,882,945 | |
+----------------------------------------------------+--+--+-----------+--+--+-------------+---------------------------------+--+
| United Kingdom | | | 88,774 | | | | 193,563 | |
+----------------------------------------------------+--+--+-----------+--+--+-------------+---------------------------------+--+
| Total | | $| 6,718,362 | | | $ | 10,555,643 | |
+----------------------------------------------------+--+--+-----------+--+--+------+------+------+-+------+----------+------+--+------+-+----------+----------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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